Retirement Contributions While Unemployed/Job Hunting
April 5, 2010 3:36 PM   Subscribe

Got laid off and while I'm looking for a new job, should I keep putting away money for retirement?

I wasn't planning on leaving my job anytime soon, but unfortunately my position was cut last week. Besides having to roll over my 401(k) from their plan, I'm wondering if/how I should keep setting aside funds for retirement.

On the one hand, I have a Roth IRA and could put a small amount from my savings into it for every week that I'm out of work. But since I don't know how long it's going to take for me to find a new job (I'm in California and trying to at least start looking at similar firms/payrate as my now former position), part of me wonders if I should be holding on to that money for COBRA and bills.

Anybody done this while they were looking? And did you just try to save anything that was left over? Or go for a target amount. My general rule has been 10% to 401(k) and 10% to Roth IRA, but I know that for the near future, I can't afford to set aside that much money each month.
posted by gov_moonbeam to Work & Money (9 answers total) 2 users marked this as a favorite
 
I would keep what funds I could liquid if at all possible. There is probably not much advantage, interest wise, between money in a Roth or money in a savings account.

Be conservative at this point.. Money put into a retirement fund may result in penalty charges if you make an early disbursement from it.

I am NOT an accountant.... and I could be dead wrong!
posted by HuronBob at 3:52 PM on April 5, 2010


Best answer: When I was in that situation, my financial advisor advised that I not pay into my Roth IRA until I had a new job.

Her advice was, since you don't yet know how long you'll be unemployed, save everything you can in a regular savings account. Bank it in case you're out of work for six months longer than you think you will be.

Then once you get a job, dump whatever's in that savings account into your Roth, and you're golden.
posted by ErikaB at 3:55 PM on April 5, 2010 [1 favorite]


You have until April 15 2011 to make the 20210 contribution to a Roth IRA. Put the money aside in a normal savings account. If you need it, you can use it for your bills/COBRA. If you still have it sitting there next March, you can put it in then.
posted by jacalata at 3:57 PM on April 5, 2010


If you have more than 6 months living expenses in savings, then continuing to contribute to a retirement fund makes sense. If you do not, it doesn't.
posted by hworth at 4:00 PM on April 5, 2010 [1 favorite]


Also, don't forget that if you collect unemployment, you have to pay taxes on it at the end of the year. Save the money, put it in a high yield money market account (My secu pays out 2%, check around at your local credit unions). Save it and, once you have your next job, put it into a retirement account, if you still have a good cushion.

If you haven't paid off all your credit cards, do it, not necessarily right this minute, but don't invest money until you have paid off these monsters.
posted by TheBones at 6:45 PM on April 5, 2010


The market has been pretty much straight up for awhile. You are likely not missing much y sitting out this year.

If you're in norcal, jobs in the bay area seem rather plentiful so it may not be that long depending on what you do.
posted by rr at 7:29 PM on April 5, 2010


Don't forget that you can always remove CONTRIBUTIONS to a Roth IRA penalty-free. So if you contribute your $5000 and park it in something low-risk (government securities, etc) you can take the full $5000 out any time you need it.
posted by jckll at 6:56 AM on April 6, 2010


jckll: true, but if you put $500 in this month, then withdraw it penalty-free in November, you can't recontribute it for this year. So if you think you might need it sometime this year, it's better to not officially contribute it at all, because then you haven't 'wasted' part of your contribution limit.
posted by jacalata at 1:08 PM on April 6, 2010


Response by poster: Excellent, thanks so much for the input. Yeah, as paranoid as I get about my retirement savings, main priority right now is day to day expenses. I went ahead & put a freeze on the monthly deduction that goes from my checking account to my Roth IRA. Hopefully I'll get back on my feet quick enough to roll an equivalent amount over into that account once I'm getting a paycheck again. Fortunately I paid off my student loan last year and I have no credit card debt, so the main thing I'm worried about in terms of finances are medical bills & insurance (completely different topic!).
posted by gov_moonbeam at 11:34 AM on April 7, 2010


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